Trick yourself to save and invest
My friend has a 4-year-old son. Like most kids, her son doesn’t like to eat vegetables. And what does he love to eat? Potato chips! Usually the lunch hour for him begins and ends in tears. The mother is usually very adamant and persistent in feeding him vegetables as part of the meal. But there are days when the kid gets unmanageable. Those are the days when the mother tricks into feeding him.
One of her most responsive trick is letting the son eat one piece of chips between each bite of vegetables, so that the kid consumes less number of chips, as she breaks each one into multiple pieces (of course, the kid is not aware of this). In the process, the boy eats exactly what she wants him to eat, while he thinks he is eating what he actually wants to.
When it comes to money, if you are like the 4-year-old, finding it difficult to save and invest, the best way is to trick yourself into it. And you will be able to succeed in managing your finances too.
The entire exercise of saving has to have an eventual pay-off for you, right? One of the best ways to save is to have a goal. Once you have reached that goal, put a little something aside for yourself. The whole exercise will be worth it. For instance, a 25-year-old woman who works in advertising used to spend all her salary on binge shopping online, on make-up or clothes — mostly on things she doesn’t even need. Then she decided to start saving Rs15,000 a month and promised herself to spend Rs2,500 a month on shopping. She now shops guilt free for Rs2,500 every month and manages to save Rs12,500.
Postpone your spending
Brian Fernandes (name changed) wanted to buy a motorbike for the longest time. His dream bike was a Royal Enfield Classic, which costs around Rs1 lakh. To remind him of his goal, he looked at a photo of the bike every morning. He started investing monthly and also cut down on all unnecessary expenses, including taking Uber rides. He is now closer to his dream purchase. Fernandes tricked himself by detaching from the discomfort of not having more disposable income and convincing himself that the money invested will be used for his big asset purchase.
Sleepover an impulsive
There are times when you come across something good and want to own it. It could be a designer bag or the iPhoneX. On the day you see it for the first time, you feel like buying it immediately. It’s possible that the prospective purchase is not so attractive the next day. The way to handle such a situation is to write down any unplanned or planned purchase of above Rs5,000 and wait 30 days before completing the purchase. If you still feel you need or want the item after 30 days, that’s a good indicator that you really need it. But if not, you’ve just saved yourself a lot of money.
Starting small is easy
You will have seen many billboards and ads for mutual funds and Systematic Investment Plans, but you might have assumed you did not belong to “that income bracket”.
Remember no amount is so small that it can’t be put to better use. For instance, Rs500 is the equivalent of a movie ticket and some popcorn. If you can substitute that movie outing for 3 years, you will have around Rs20,000 in your investment account, assuming the savings instrument has earned 9% annually.
Enlist a buddy
Ask a friend to join you in the investing habit so that you may stop each other from spending and support each other if temptation strikes. Both of you can start by writing down the amount you need to save in the next six months and discuss this often. If an unexpected purchase whim strikes you, immediately call your friend who will talk you out of that buy. You may support your buddy in the same way.
Try some of these tricks and save some money from this financial year.
Nisreen Mamaji is a certified financial planner and founder of MoneyWorks Financial Advisors